DNB: new cabinet must sharpen climate policy significantly

October 23, 2021 by No Comments

As soon as the formation gains some momentum in The Hague, climate policy will undoubtedly emerge as one of the political headaches. National and international climate goals will probably not be achieved, stricter climate policy threatens to hurt society.

Unsolicited advice is already coming from Amsterdam to the new cabinet. De Nederlandsche Bank says in a study that will be published this Wednesday: climate policy in The Hague can be more ambitious and it must be more ambitious. The Netherlands “is lagging behind the set climate targets,” according to the central bank and regulator. That is why it is crucial that climate policy is sharpened considerably in the coming cabinet term. Green investments must be accelerated, argues DNB. To help finance these, and to reduce emissions, the tax on CO2 upwards.

“The more you put things off in front of you, the greater the burden in the future and the more jerky the adjustment will take place,” says Olaf Sleijpen, member of the board of directors of DNB, in an explanation per video conversation. “As the guardian of financial stability in the Netherlands, we are concerned about this.”

In the past, DNB was already actively involved in discussions in The Hague about, among other things, the housing market and the labor market. In recent years, DNB has been increasingly vocal about the climate in The Hague. In 2018, DNB set a national CO2levy before and last year, the regulator advocated for green recovery policy after the corona crisis. Major investments in sustainable energy, among other things, should benefit both the economic recovery and the climate.

‘Green recovery’

That last call almost killed in The Hague. So far, little has come of ‘green recovery’ in the Netherlands, unlike in Germany and France, for example. Billions are invested there in, among other things, hydrogen technology and making buildings more sustainable.

A new coalition agreement in the Netherlands should not lack a “nice package to encourage climate investments”, says Sleijpen. According to DNB, the government must create the right conditions for private investment, including through subsidies and guarantees. In the report, DNB argues, among other things, for an increase in subsidies for making homes more sustainable, because this is often not profitable for consumers at the moment. The development of hydrogen technology, heat networks, CO2-capturing and adapting energy networks require a ‘directing role’ from the government.

The choice for climate policy, says DNB, means that ‘other priorities may have to give way’ in order not to endanger the sustainability of public finances. “These are politically difficult choices, but necessary to mitigate the risks of climate change.”

At the beginning of this year, a committee led by Laura van Geest, the chair of the Netherlands Authority for the Financial Markets, calculated the price tag of the EU climate goals to which the Netherlands has committed itself (55 percent CO2reduction in 2030 compared to 1990). Public expenditure will increase from 4.5 to 10 billion euros per year, or 1.2 percent of Dutch GDP.

That does not just mean an extra attack on the treasury. “There is quite a bit of budgetary room for that expenditure. For example, we have the government’s growth fund, which is 20 billion in the coming cabinet term. If we write a recovery plan, there will also be more than 5.5 billion from the recovery fund in Brussels.”

The request for the EU funds has not yet been made because Brussels wants reforms in return. For example, further restrictions on the deduction of mortgage interest. And the outgoing cabinet does not want to decide on that. Do not wait too long, is the advice of Sleijpen. “Write that recovery plan and make sure you get that money and use it to a large extent for sustainability.”

fossil subsidies

In addition to these climate funds, money can also be obtained from the subsidies on fossil activities, which are still applicable today. They can be phased out. For example, the Netherlands does not levy excise duty on fuel for aviation and shipping. “And think of the discount that large consumers receive on their energy tax. These large companies pay less than SMEs for their gas and electricity. The Ministry of Economic Affairs and Climate itself has calculated that this is 4.5 billion annually.” If you also consider the pricing of the CO2emissions expands and increases, then it “almost calculates”. DNB believes that industry and agriculture pay too little for their greenhouse gas emissions, while households and the service sector pay relatively much.

But, Sleijpen admits immediately, the Netherlands cannot tax all emissions on its own. “Certainly with a broader tax on CO2emissions, the benefits are small if only the Netherlands does this. That should at least be European. But you don’t have to wait with investing and tackling the discounts for large consumers.”

For agriculture, DNB argues in its report for ‘more compelling measures’ to make it more sustainable. A recent report from top officials recently cited livestock shrinkage as a result of new policies. “Ultimately, the politicians have to lay an egg there. From an economic perspective, we as DNB can indicate what should be done. But the most important point in the whole analysis is: if you don’t do anything in agriculture, things get stuck.”